Innovation With A Dash Of Paprika

Sanjeev Chadha, chairman of
PepsiCo
India, likes to toss around the term "Indovation." Meaning, innovation for India, in India. "We see it playing a greater role in our growth story in India and in other emerging markets as well," he says.

So, for instance, last fall the company came up with Aliva, a baked cracker with Indian seasonings, which has become so popular in the Indian market that the company is considering making local versions of it for other markets as well. Another concoction out of the Indian market is a drink called Nimbuz, the Hindi word for lemon. "Nimbu paani [lemonade] is almost a national beverage," says Chadha. "You see it all over the street, at home, everywhere. If you have it outside, hygiene is a problem. We can now offer real [lemonade], just like your mother makes it and also beautifully packed."

Another popular product for the company is Slice, a mango drink, which celebrates the Indian love for mangoes, says Chadha. Each region in India has a different kind of mango. "Average is normally awful," he says. But the
PepsiCo
scientists combined different mango flavor notes into this one drink. The final result: Depending on your favorite variety, that's the flavor you notice when drinking it.

The company seems to have hit upon something with this going-local strategy. With $1.5 billion in retail sales in India, PepsiCo is the largest food and beverage company in the country. Last year's performance, when sales grew 30%, was its best in a decade, and it surpassed
Nestle
.

One success that laid the path for these later "Indovations" came through a snack called Kurkure. Chadha calls it a bridge snack because it transcended the world of traditional Indian snacks (namkeen) and Western, salty snacks like potato chips. This Cheetos-like snack (Kurkure literally means crunchy) is spiced up with Indian seasonings, and in the decade that it has been launched, it has become the No. 1 salty snack in India in tonnage and generates almost the same revenue as the company's flagship potato chips, Lay's.

PepsiCo, which also likes to refer to itself as an agricultural company, is taking an active agrarian role in India. It's currently working with 20,000 farmers in seven states, including 10,000 potato farmers, and plans to increase this to 50,000 farmers in the next three years. One basic reason for this high number is the fact that the country has tiny, highly fractured landholdings. For instance, in Australia, PepsiCo has a similar-size business in tonnage as India, but there it doesn't deal with more than 20 farmers, says Chadha. Also, while it's typical for the company to have its own farms in countries where it does business, in India the law prohibits foreign companies from buying agricultural land.

In any case, PepsiCo has ended up training farmers on better cultivation methods. For instance, the farmers it works with have replaced the system of flood cultivation to grow rice with direct seeding. The former uses 3,000 liters of water to grow 1kg of rice and the latter reduces this by a third.

PepsiCo is also adding vitamins to snacks focused on malnutrition in India. It's developing fortified snacks and beverages at the affordable price of Rs 2 or Rs 3 -- about a nickel. If it's successful, this is another "Indovation" that could be applied by the company in other emerging markets.